Bearish view
- Set a sell-stop at 0.7240 (Tuesday low).
- Add a take-profit at 0.7150 and a stop-loss at 0.7300.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 0.7288 and a take-profit at 0.7350.
- Add a stop-loss at 0.7200.
The AUD/USD price struggled during the overnight session after the latest lockdown in New Zealand. The pair declined to 0.7250, which was the lowest level since November 2020.
New Zealand Lockdown
Australia and New Zealand have a close trade relationship. Therefore, the Australian dollar retreated since Tuesday after New Zealand reported its first Covid case in more than 6 months.
The single case pushed the government to announce a national lockdown to help authorities do a comprehensive contact tracing program and boost their vaccination drive. It also pushed the Reserve Bank of New Zealand (RBNZ) to hold interest rates steady at 0.25%.
The AUD/USD declined because investors are relatively concerned about the rising cases in the region. Australia is already battling a new wave that has pushed some states like New South Wales and Victoria to lockdown.
The Australian dollar also reacted to the latest wage price index data. According to the bureau of statistics, the country’s wages declined from 0.6% in the first quarter to 0.4% in the second quarter. This decline was lower than the expected 0.6%. The wage price index rose by 1.7% on a year-on-year basis.
These numbers came a day before the country is expected to publish its employment numbers. Analysts expect the data to show that the unemployment rate rose from 4.9% to 5.0% in July.
Meanwhile, the pair was also impacted by the relatively weak US retail sales. The numbers showed that the headline sales declined by 1.1% on a month-on-month basis in July. The core retail sales also declined as consumers remained concerned about the rising sticker prices.
The next key mover for the AUD/USD pair will be the Federal Reserve minutes that will come out later today. These minutes will provide more color about the deliberations among Fed officials.
AUD/USD Technical Analysis
The AUD/USD declined sharply on Tuesday after the new Covid case in New Zealand. It fell to 0.7240, which was lower than 0.7288, which was the lowest level on July 21st. It also moved below the neckline of the head and shoulders pattern at 0.7320 and the 25-day and 50-day exponential moving averages.
Therefore, the pair will likely maintain the bearish trend as bears attempt to move below 0.7200. This view will be invalidated if the price rises above 0.7350.
